1. 1. The Fine Garments Company sells fashion clothing. The forecasted annual demand for its premium leather jacket is 1200. The order processing cost per da is $25, and the inventory holding cost is $50/item/year. The company wants to use a reorder point system. It has the order quantity set at 35. To allow for uncertainties in delivery and in customer demand it wishes to hold 4 weeks of demand as safety stock. 
2. What should its reorder point be if the delivery lead time is 2 weeks? 

1. 2.  Hamilton Fabricators at Te Rapa orders steel plates from the Te Akau steel plant on a regular basis. An investigation revealed the following details: annual demand = 5,000 tons, 
2. cost of steel = $2,000/ton, 
3. current order size = 500 tons
4. Transported by TranzRail:
5. TranzRail transport cost = $100/ton,
6. safety inventory carried = 50% of demand during replenishment lead time, 
7. Inventory holding cost = 25% of purchase price per year, 
8. replenishment lead time = 5 days. 
9. 
   
10. Required
11. Calculate the transit inventory cost
12. Safety inventory cost
13. Transportation cost on an annual basis.

Answer rating: 100% (QA)

1 Reorder Point Calculation Reorder Point ROP is the inventory level at which a new order should be placed to avoid stockouts during the lead time It ... View the full answer